Adjustments for Non-Cash Items (USD, thousands)

Stock-Based Compensation (USD, thousands)

Changes in Working Capital (USD, thousands)

Capital Expenditures (CapEx) (USD, thousands)

Proceeds from / Repayments of Debt (USD, thousands)

Share Repurchases (USD, thousands)

Dividend Payments (USD, thousands)

Net Change in Cash (USD, thousands)

ea5b6d1d580cfa50ac5cef680f98a5a889099db933b967969944607aeaa9ac93

Current Assets (USD, thousands)

Cash and Cash Equivalents (USD, thousands)

Accounts Receivable (USD, thousands)

Inventory (USD, thousands)

Non-Current Assets (USD, thousands)

Property, Plant, and Equipment (PP&E) (USD, thousands)

Goodwill (USD, thousands)

Intangible Assets (USD, thousands)

Current Liabilities (USD, thousands)

Accounts Payable (USD, thousands)

Short-term Debt (USD, thousands)

Accrued Expenses (USD, thousands)

Non-Current Liabilities (USD, thousands)

Long-term Debt (USD, thousands)

Lease Liabilities (USD, thousands)

Deferred Tax Liabilities (USD, thousands)

Shareholders' Equity (USD, thousands)

Retained Earnings (USD, thousands)

Common Stock (USD, thousands)

Additional Paid-in Capital (USD, thousands)

cadcec7b5dd9573870bdc7f6a7181e212084f99a3feba211e7943699f74deac5

Total Revenue (USD, thousands)

Cost of Goods Sold (COGS) (USD, thousands)

Selling, General, and Administrative Expenses (SG&A) (USD, thousands)

Research and Development (R&D) (USD, thousands)

Depreciation and Amortization (D&A) (USD, thousands)

Interest Expense (USD, thousands)

Operating Income (EBIT) (USD, thousands)

Net Income (USD, thousands)

Earnings Per Share (EPS) - Basic (USD)

Earnings Per Share (EPS) - Diluted (USD)

716f692e1f43e83ab374df177e1211e0c7c6d197e353fb349b6fce3b69e79ace

Critical Illness Recovery

- Medicare

- Non-Medicare

Rehabilitation

Outpatient Rehabilitation

Concentra

Other

- Other Revenue

Total Revenue

e5a919df3f667751ffcf0062fe664969d82453f70e418d37abd81c5c853160c1

| Program Details            | Program 1          |
|----------------------------|--------------------|
| Approval Date              | N/A                |
| End Date/Duration          | **December 31, 2025**  **[0001628280-24-044570_sem-20240930.htm:61]** **[0001628280-24-044570_sem-20240930.htm:53]**  |
| Total additional amount    | **$1.0 billion**  **[0001628280-24-044570_sem-20240930.htm:61]** **[0001628280-24-044570_sem-20240930.htm:53]**  |
| Remaining authorization amount | **$399.7 million** as of **September 30, 2024**  **[0001628280-24-044570_sem-20240930.htm:61]** **[0001628280-24-044570_sem-20240930.htm:53]**  |
| Details                    | The program is intended to repurchase up to $1.0 billion worth of shares of its common stock. It is funded with cash on hand and borrowings under the company's revolving facility.  **[0001628280-23-004854_sem-20221231.htm:181]** **[0001628280-24-006385_sem-20231231.htm:181]** **[0001628280-24-006385_sem-20231231.htm:122]** **[0001628280-23-036426_sem-20230930.htm:49]**  |

af4dc71c4b3f677d4ec86321815d017510e2df0ab04cb7ee2d8043dc3b30c657

Revenue per patient day in Critical Illness Recovery Hospitals (USD)

Patient days in Critical Illness Recovery Hospitals

Occupancy rate in Critical Illness Recovery Hospitals (%)

Revenue per patient day in Rehabilitation Hospitals (USD)

Patient days in Rehabilitation Hospitals

Occupancy rate in Rehabilitation Hospitals (%)

Patient visits in Outpatient Rehabilitation Segment

Revenue per visit in Outpatient Rehabilitation Segment (USD)

Patient visits in Concentra Segment

Revenue per visit in Concentra Segment (USD)

Number of critical illness recovery hospitals operated

Number of rehabilitation hospitals operated

Number of outpatient rehabilitation clinics operated

Number of onsite clinics operated—end of period

Number of visits (total)

bfe071e1d0fdad721a8c5c6f3c5698128f7507090852c8f3f2a1b8d312dc382f

Select Medical Holdings Corporation (SEM) is a prominent healthcare services provider in the United States, operating since **1997**. The company specializes in managing critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers. SEM offers a wide range of healthcare services, including intensive physical rehabilitation, occupational health services, and consumer health services, across **46 states and the District of Columbia**.  **[0001628280-24-006385_sem-20231231.htm:5]** 

1. **Critical Illness Recovery Hospital** - Operates hospitals that serve patients recovering from critical illnesses with complex medical needs, typically admitted from general acute care hospitals.  **[0001628280-24-006385_sem-20231231.htm:5]** 
2. **Concentra** - Provides occupational health services, physical therapy, and consumer health services through occupational health centers and contract services at employer worksites.  **[0001628280-24-006385_sem-20231231.htm:5]** 
3. **Outpatient Rehabilitation** - Offers physical, occupational, and speech rehabilitation services through a network of clinics.  **[0001628280-24-006385_sem-20231231.htm:5]** 
4. **Rehabilitation Hospital** - Manages hospitals providing intensive physical rehabilitation care, with patients usually admitted from general acute care hospitals.  **[0001628280-24-006385_sem-20231231.htm:5]**

b897bdb295d168c5f0704a803932cb5776fb211d976facc53b6f1ab65ef23dbd

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

1. Given your plan to reduce SWB (Salaries, Wages, and Benefits) as a percentage of revenue to around 57% this year, what specific initiatives are you implementing to achieve further reductions next year, and how sustainable are these improvements?  **[SEM_3405427_10]** 
2. With the closure of an LTAC hospital in Ohio due to consolidation and noticing a reduction in your LTAC hospital count, what is your long-term strategy for the LTAC division, especially considering challenges with threshold levels and high-cost outliers?  **[SEM_3405427_9]** **[SEM_3405427_7]** 
3. You have outlined significant capital expenditures, planning to add 569 additional beds through operations by 2026, primarily in the inpatient rehab division. How do you intend to finance these developments while maintaining your target leverage ratio of 3x, and what returns do you expect from these investments?  **[SEM_3405427_0]** **[SEM_3405427_6]** 
4. In the outpatient rehab division, margins have improved due to efficiency efforts and technology implementation. Can you elaborate on how your internally developed system is enhancing clinical efficiency, and what impact do you expect this to have on future margins?  **[SEM_3405427_11]** **[SEM_3405427_12]** 
5. Following the Concentra IPO and the planned distribution of your remaining interest to shareholders, how will the loss of Concentra's revenue and adjusted EBITDA impact your overall financial performance, and what strategies are in place to mitigate this effect?  **[SEM_3405427_0]** **[SEM_3405427_6]** 

65ba8c57a4e5697ce0158390121f04155c77a6a03b49831e8b47689d01570c47

### Q3 2024 Earnings Call
   - **Issued Period**: Q3 2024
   - **Guided Period**: FY 2024
   - **Guidance**:
     - **Revenue**: $6.95 billion to $7.15 billion.  **[SEM_3405427_4]** 
     - **Adjusted EBITDA**: $865 million to $885 million.  **[SEM_3405427_4]** 
     - **Fully Diluted EPS**: $2.01 to $2.12.  **[SEM_3405427_4]** 
     - **Adjusted EPS**: $2.09 to $2.20.  **[SEM_3405427_4]** 
     - **Capital Expenditures**: $200 million to $250 million.  **[SEM_3405427_4]** 

### Q2 2024 Earnings Call
   - **Issued Period**: Q2 2024
   - **Guided Period**: FY 2024
   - **Guidance**:
     - **Revenue**: $6.9 billion to $7.1 billion.  **[SEM_3396282_4]** 
     - **Adjusted EBITDA**: $845 million to $885 million.  **[SEM_3396282_4]** 
     - **Fully Diluted EPS**: $1.95 to $2.19.  **[SEM_3396282_4]** 
     - **Adjusted EPS**: $1.96 to $2.20.  **[SEM_3396282_4]** 
     - **Capital Expenditures**: $225 million to $275 million.  **[SEM_3396282_4]** 

### Q1 2024 Earnings Call
   - **Issued Period**: Q1 2024
   - **Guided Period**: FY 2024
   - **Guidance**:
     - **Revenue**: $6.9 billion to $7.1 billion.  **[SEM_3383568_4]** 
     - **Adjusted EBITDA**: $845 million to $885 million.  **[SEM_3383568_4]** 
     - **Fully Diluted EPS**: $1.95 to $2.19.  **[SEM_3383568_4]** 
     - **Adjusted EPS**: $1.96 to $2.20.  **[SEM_3383568_4]** 
     - **Capital Expenditures**: $225 million to $275 million, with $123 million allocated towards maintenance.  **[SEM_3383568_4]** 

### Q4 2023 Earnings Call
   - **Issued Period**: Q4 2023
   - **Guided Period**: FY 2024
   - **Guidance**:
     - **Revenue**: $6.9 billion to $7.1 billion.  **[SEM_3374861_3]** 
     - **Adjusted EBITDA**: $830 million to $880 million.  **[SEM_3374861_3]** 
     - **Earnings per Fully Diluted Common Share**: $1.88 to $2.18.  **[SEM_3374861_3]** 
     - **Capital Expenditures**: $225 million to $275 million.  **[SEM_3374861_3]** 

59729f606f91fee3e76cf311d55bbb79a410a87d785c290675c8029e443148d2

| Name                     | Position                                              | Start Date         | Short Bio                                                                                                                                                                                                                     |
|--------------------------|-------------------------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Robert A. Ortenzio       | Executive Chairman and Co-Founder                     | February 1997      | Co-founded SEM in **February 1997**. Served as CEO from **2005 to 2013** and President/COO from **1997 to 2001**. Appointed Executive Chairman on **January 1, 2014**.  **[0001628280-24-006385_sem-20231231.htm:58]** **[0001104659-24-034799_tm242678d5_def14a.htm:53]** **[0001104659-24-027529_tm242678d2_pre14a.htm:53]**                                             |
| Rocco A. Ortenzio        | Vice Chairman and Co-Founder                          | February 1997      | Co-founded SEM in **February 1997**. Served as Chairman/CEO from **1997 to 2001** and Executive Chairman from **2001 to 2013**. Appointed Vice Chairman on **January 1, 2014**.  **[0001628280-24-006385_sem-20231231.htm:58]** **[0001104659-24-034799_tm242678d5_def14a.htm:53]**                                        |
| David S. Chernow         | Chief Executive Officer and Director                  | January 1, 2014    | CEO since **January 1, 2014**. Appointed as a director effective **August 1, 2024**.  **[0001104659-24-084960_tm2420448d3_8k.htm:1]** **[0001628280-24-006385_sem-20231231.htm:59]**  Previously served as President/CEO from **2010 to 2014** and held other executive roles since **2010**.  **[0001628280-24-006385_sem-20231231.htm:59]** **[0001628280-23-004854_sem-20221231.htm:57]** **[0001104659-24-084960_tm2420448d3_8k.htm:1]**                  |
| Martin F. Jackson        | Senior EVP, Strategic Finance and Operations          | October 1, 2023    | Joined SEM in **1999**. Served as CFO from **2007 to 2023**. Appointed Senior EVP of Strategic Finance and Operations on **October 1, 2023**.  **[0001628280-24-006385_sem-20231231.htm:59]** **[0001628280-24-006385_sem-20231231.htm:58]** **[0001104659-23-098970_tm2325650d1_ex99-1.htm:1]**                                                                        |
| Michael F. Malatesta     | EVP and Chief Financial Officer                       | October 2023       | Joined SEM in **1999**. Held various senior finance roles, including SVP of Finance from **2013 to 2023**. Appointed CFO in **October 2023**.  **[0001628280-24-006385_sem-20231231.htm:59]** **[0001104659-23-098970_tm2325650d1_ex99-1.htm:1]**                                                                          |
| John A. Saich            | President                                             | October 1, 2023    | Joined SEM in **1998**. Previously served as EVP/Chief Administrative Officer from **2018 to 2023**. Appointed President on **October 1, 2023**.  **[0001628280-24-006385_sem-20231231.htm:59]** **[0001104659-23-098970_tm2325650d1_ex99-1.htm:1]** **[0001104659-23-098970_tm2325650d1_8k.htm:1]**                                                                    |
| Thomas P. Mullin         | President                                             | October 2023       | Joined SEM in **2008**. Held leadership roles, including EVP of Hospital Operations from **2020 to 2023**. Appointed President in **October 2023**.  **[0001628280-24-006385_sem-20231231.htm:60]** **[0001104659-23-098970_tm2325650d1_8k.htm:1]**                                                                    |
| Michael E. Tarvin        | Senior EVP, General Counsel, and Secretary            | October 2023       | Joined SEM in **1997**. Held various legal roles, including EVP/General Counsel from **2007 to 2023**. Appointed Senior EVP in **October 2023**.  **[0001628280-24-006385_sem-20231231.htm:60]**                                                                          |
| Brian R. Rusignuolo      | EVP and Chief Information Officer                     | January 2021       | Joined SEM in **2001**. Previously served as SVP/CIO from **2012 to 2021**. Appointed EVP/CIO in **January 2021**.  **[0001628280-24-006385_sem-20231231.htm:60]**                                                                                                        |
| Christopher S. Weigl     | SVP, Controller, and Chief Accounting Officer         | March 1, 2023      | Joined SEM in **2022**. Previously served as SVP of Corporate Accounting Services from **2022 to 2023**. Appointed CAO on **March 1, 2023**.  **[0001628280-24-006385_sem-20231231.htm:60]** **[0001104659-23-027310_tm238167d1_8k.htm:1]**                                                                           |
| Robert G. Breighner, Jr. | SVP, Compliance and Audit                             | October 2023       | Joined SEM in **2001**. Previously served as VP of Compliance and Audit Services from **2003 to 2023**. Appointed SVP of Compliance and Audit in **October 2023**.  **[0001628280-24-006385_sem-20231231.htm:60]** **[0001104659-23-098970_tm2325650d1_ex99-1.htm:1]**                                                    |

6a67f88cd9dafb84b4ed3b4ff167b72030d1f864d76fcfef509573052587966b

- **Declining occupancy and margins in the critical illness recovery hospital division**: The company reported a **1% drop in occupancy year-over-year** and acknowledged that **Q1 is always our highest quarter**, with a **drop in census in Q2**. This suggests ongoing challenges in maintaining occupancy levels.  **[SEM_3396282_5]**
- **Decreasing margins in the outpatient rehabilitation division**: The adjusted EBITDA margin for the outpatient rehab division **decreased from 10.8% to 9.1%**, representing a **12% decrease in adjusted EBITDA** compared to the prior year. While efforts are underway to improve efficiencies, the outcome remains uncertain.  **[SEM_3396282_6]**
- **Anticipated increase in borrowing costs impacting earnings**: The company expects borrowing costs to rise in Q4 due to the expiration of interest rate caps. Borrowing costs will go from the **300 basis point spread plus 1% SOFR to SOFR around 5.3%**, which will **certainly have a negative impact in the fourth quarter**.  **[SEM_3396282_8]**

afffe52c1e322957fdf4b1bfa1c64f8aff99878ba6da007f73e500f131379550

- The **increase in case mix index (CMI)** in the LTAC hospitals is **likely seasonal** and **may not be sustainable**, as higher CMI in Q1 is typically due to winter respiratory cases.  **[SEM_3383568_17]**
- **Concentra** is seeing **decreased employer demand** for services like drug screenings and physicals due to **lower hiring levels**, potentially impacting revenue in this division.  **[SEM_3383568_16]**
- Post-Concentra spin-off, both entities are expected to have a **high leverage of approximately 4x**, indicating significant debt levels that may pose financial risks.  **[SEM_3383568_8]**

098c281300610b3c6f49babd1028262f94c39cdd0f5c103b9061f93a47ceeb6b

1. **Capital Deployment & Leverage**  
   **Q:** What's your capital deployment strategy post spin?  
   **A:** Management intends to maintain leverage at **3x**.  **[SEM_3405427_6]**  With a robust development pipeline, they plan to allocate capital opportunistically, focusing on development projects while balancing deleveraging through free cash flow and potential stock buybacks.  **[SEM_3405427_6]**  Maintaining a **3x** leverage ratio is a priority to preserve flexibility.  **[SEM_3405427_6]** 

2. **SWB as Percentage of Revenue Outlook**  
   **Q:** Can SWB as % of revenue improve further?  
   **A:** They believe SWB as a percentage of revenue can decrease next year.  **[SEM_3405427_10]**  This year, they expect it to end around **57%**  **[SEM_3405427_10]** , compared to **54-55%** in the first quarter.  **[SEM_3405427_10]**  Improvement will be driven by **mid-range single-digit increases** in commercial contract rates and volume increases, especially from improved Medicare Advantage admissions due to CMS mandates.  **[SEM_3405427_10]** 

3. **Outpatient Rehab Margin Improvement**  
   **Q:** What's the outlook for outpatient rehab margins?  
   **A:** Significant margin improvement is anticipated next year in the outpatient rehab segment.  **[SEM_3405427_11]**  This will be achieved through enhanced clinical efficiency via internally developed technology, allowing therapists to see more patients per day.  **[SEM_3405427_11]**  A major system release at year-end is expected to be a **"game changer"**.  **[SEM_3405427_11]** 

4. **LTAC Development Plans and Strategy**  
   **Q:** What's your approach to LTAC development?  
   **A:** The company focuses on LTAC growth through partnerships and hospital-within-a-hospital models, which are less capital intensive.  **[SEM_3405427_7]**  They plan to be judicious with capital deployment in this area, preferring opportunities that require less capital, though some de novos will still occur.  **[SEM_3405427_7]** 

5. **IRF Rates Update**  
   **Q:** Are Medicare IRF base rates around 3%?  
   **A:** Yes, management confirms that the Medicare Inpatient Rehabilitation Facility rates are in the **3%** range  **[SEM_3405427_8]** , aligning with the final rule's net market basket adjustment.  **[SEM_3405427_8]** 

6. **LTAC Occupancy Trends and Outlier Thresholds**  
   **Q:** How are LTAC occupancy trends and outlier thresholds affecting you?  
   **A:** Occupancy rates were higher than the prior year's same quarter, which pleased management.  **[SEM_3405427_5]**  The seasonal decline is normal for the third quarter and not related to staffing issues.  **[SEM_3405427_5]**  Operators have effectively managed high-cost outliers, with minimal impact observed.  **[SEM_3405427_5]** 

7. **Closure of an LTAC Hospital**  
   **Q:** Was there a reduction in LTAC hospitals?  
   **A:** Yes, they closed one LTAC hospital in Ohio due to consolidation.  **[SEM_3405427_9]** 

8. **Contract Labor Costs in Outpatient Rehab**  
   **Q:** Are you seeing higher contract labor costs?  
   **A:** They've seen a sequential decline in agency staffing costs, which has helped margins.  **[SEM_3405427_12]**  Additionally, technology improvements are expected to enhance clinical efficiency in the future.  **[SEM_3405427_12]** 

68828acbcab5b69c7c18cec2ede57f5a8a282cf12da39d207e9b01b03f040892

- **Select Medical has significantly improved labor costs by reducing reliance on agency nurses, leading to a decrease in salary, wages, and benefits ratio, which positively impacts margins.** This was achieved through decreased agency utilization and orientation hours.  **[SEM_3383568_6]**   **[SEM_3383568_11]**   **[SEM_3383568_7]**   **[SEM_3383568_14]**
- **The critical illness recovery hospital division experienced increases in volume and case mix index (CMI), resulting in higher rates and improved margins, despite Medicare reimbursement pressures.** Executives feel confident about the sustainability of the higher CMI.  **[SEM_3383568_17]**   **[SEM_3383568_11]**
- **The company is successfully expanding through new hospital openings and partnerships, such as the new hospital with RUSH University System, which is filling up nicely.** This expansion is expected to contribute positively to future growth.  **[SEM_3383568_5]**

d0a42f9fbcd21986c59b624e5af65cd8dae31802946f2e1f439361698c66a130

- **Strong performance and growth expected in the Inpatient Rehab and Concentra divisions**, with continued **revenue and EBITDA growth**.  **[SEM_3374861_5]**
- **Robust development pipeline in Inpatient Rehab**, with new projects in partnership with large acute care systems, expected to **drive growth without compromising margins**.  **[SEM_3374861_12]**
- **Increasing patient volumes in Critical Illness Recovery Hospitals**, with volumes up across the country in Q1, potentially sustainable and contributing to revenue growth.  **[SEM_3374861_14]**

cdc6fb1d0e1c728fbb4076d08404e4b084f385e24a91224c728b5177ec513850

- The impending expiration of interest rate caps in September 2024 is expected to increase interest expense by approximately **$20 million** in the fourth quarter, leading to a **$0.12** reduction in EPS, with limited options to mitigate this impact.  **[SEM_3374861_22]** **[SEM_3374861_21]**
- The outpatient rehabilitation segment is facing pressures due to **Medicare cuts**, leading to muted growth and margin compression. The company expects margins in this segment to return to target levels only in the next **2–3 years**.  **[SEM_3374861_16]** **[SEM_3374861_7]** **[SEM_3374861_5]**
- The critical illness recovery hospital division is experiencing headwinds related to **high-cost outlier payments**, and the recent increase in volumes may not be sustainable as they are influenced by seasonal factors such as the winter months.  **[SEM_3374861_5]** **[SEM_3374861_14]**

dd15a228e98f08cac63aa5ee7547d51cc4be620b44b58ddabe48ea05a59eb0a1

- **Management expects margin improvement in the outpatient rehab division over the next two quarters**, focusing on clinical efficiencies and scheduling optimizations to drive productivity and profitability improvements.  **[SEM_3396282_6]**
- **Underlying wage rates for permanent staff in critical illness hospitals are trending at 3% to 3.5%, returning to pre-pandemic levels**, which stabilizes labor costs and can positively impact margins.  **[SEM_3396282_8]**
- **The sequential decline in occupancy from Q1 to Q2 in LTAC margins is attributed to exceptionally high volumes in Q1, with underlying demand remaining strong**, indicating stable performance moving forward.  **[SEM_3396282_5]**

b1ed74a616f67e4e3a1e63093d69db32c41e7c370cfc3aef756ea3c76aff2f65

- **Outpatient rehabilitation margins improved due to reductions in contract labor costs and increased clinical efficiency, aided by new technology, which is expected to further enhance margins going forward.**  **[SEM_3405427_11]** **[SEM_3405427_12]**
- **Management anticipates reducing Salaries, Wages, and Benefits expense as a percentage of revenue through successful commercial contract negotiations yielding mid-single-digit rate increases and higher patient volumes, particularly as Medicare Advantage plans align with traditional Medicare criteria.**  **[SEM_3405427_10]**
- **Select Medical has a robust development pipeline, especially in inpatient rehabilitation hospitals, and plans to deploy capital opportunistically while maintaining leverage at **3x**, providing flexibility for growth.**  **[SEM_3405427_6]**

0159278d019fa50003ab5f9abf5e76e58bb0e2b2c30bda8974c2095ad73b172e

- **Select Medical is facing challenges in its Long-Term Acute Care (LTAC) segment, with threshold levels making the business tougher**.  **[SEM_3405427_7]**  The CEO mentioned they are being more judicious on capital deployment in LTAC, indicating possible future underperformance in this segment.  **[SEM_3405427_7]**
- **The company is decreasing its investment in the LTAC segment**, focusing more on opportunities in the inpatient rehab side, which may limit future growth in the LTAC division.  **[SEM_3405427_7]**
- **Select Medical closed an underperforming LTAC hospital in Ohio**, suggesting performance issues in certain assets.  **[SEM_3405427_9]**

12cfb6a7e328d3fa9fd8a3cc1418bfd74b94de02f7f3f09b20d7f396e2c5df2e

Select Medical Holdings Corp (SEM)

Financials